please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly The Ricardian equivalence proposition states that anincrease in the deficit will lead to a decrease in privatesavingSelect one:TrueFalse

This statement is TrueThe Ricardian equivalence proposition, by David Ricardo and extended by Robert…

Answered: The Ricardian equivalence proposition…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 1P

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In what ways do future generations benefit from this generation’s deficit spending? Cite three examples.
Expectation in Fiscal policy & Ricardian equivalence. One can argue that macroeconomics is essentially a story of a 'journey' from disequilibrium back to equilibrium. The recession caused by Covid that had forced many countries to use fiscal policy to compensate the shock and stimulate the economy is one example of disequilibrium. Cited from the Ministry of Finance website, the use of the government budget to mitigate the impact of the Covid crisis was clearly stated: "The state budget will continue to work hard to protect the community through Covid 19 handling from a health perspective, especially during the implementation of the Emergency Community Activity Restrictions (PPKM). This refocusing and sharpening of priorities is expected to help all communities in various sectors, especially the health sector, in dealing with Emergency PPKM." (MOF-RI News Index, 7/5/2021). Questions: a. Based on the macro workhorse model, explain the 'journey' (mechanism) how an initial disequilibrium…
Calculate primary deficit
To eliminate the deficit (and halt the growth of the net public debt), a politician suggests that “we should tax the rich.” The politician makes a simple arithmetic calculation in which he applies a higher tax rate to the total income reported by “the rich” in a previous year. He says that the government could thereby solve the deficit problem by taxing “the rich.” What is the major fallacy in such a claim?
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If the president and parliament agree on a policy to reduce the budget deficit by increasing taxes while holding government spending constant, what impact will this fiscal contraction policy have on output and interest rates?

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The Ricardian equivalence proposition states that an increase in the deficit will lead to a decrease in private saving Select one: True False